[ZeroHedge] Today, we will briefly run through the narratives that are driving markets and shaping the economy. We had the opportunity to discuss many of these during the first ½ hour of Bloomberg Surveillance on Wednesday morning.
THE I-SHAPED ECONOMY
We had some interesting discussions around last weekend’s What Shape is the Economy? There seems to be agreement that “little i” represents the fact that a small segment of the population is doing extremely well, which isn’t reflected in either the K or k-shaped economy that so many people like to use. There is more debate on how “the stick” in the i is doing. We argued that basically it is okay, but got some pushback that those outside of the elite circle are struggling. Concern about jobs (not actual job losses, but concern about job losses) came up frequently as did indications that the consumer, at all levels, is stretched (delinquencies for lower income consumers, and “trading down” for even higher income consumers). The arguments against the vast majority doing well were reasonably compelling, but for now, I’m still in the “most people are okay to good with a few doing extremely well” camp.
Ra-Ra-RasPUTIN
Academy’s Geopolitical Intelligence Group weighed in on Russia’s Air Space Incursions, in a SITREP and in the podcast mentioned earlier in this report. The President urged for NATO members to take a tough stance on such incursions during the United Nations General Assembly.
This certainly adds a new dimension to the war in Europe, but what I am most interested in, is that “suddenly” everyone is discussing the possibility of Europe taking Russia’s frozen reserves, and using the money to fund the war effort and their military spending. We advocated for this possibility two weeks ago in Ra-Ra-RasPUTIN and believe that this is the most important development in the war. More important even than Russia’s air space violations. Why? Because Russia is expecting these reserves to be returned (presumably, some may be spoken for by those countries that supply Russia with military equipment or components that Russia is using), so not getting them will hurt. At the same time, using that money to buy weapons (primarily from American suppliers) for the Ukrainians puts pressure on Putin in the battlefield.
PEACE THROUGH STRENGTH
A flurry of stories hit the tape on Thursday that the Secretary of War was calling a large number of senior flag officers (1-star and above Generals and Admirals, from the Army, Air Force, Navy, and Marine Corps) to Virginia for some meetings.
There is little (or no) information on what is going to be discussed. General Spider Marks gave his thoughts to the nation on CNN yesterday. There has been some reporting that this is preparing the military for some personnel changes, in the event of a Government Shutdown.
THE “MYTHICAL” NEUTRAL RATE
I was somewhat surprised, pleasantly, that new Fed board member used his first public speaking opportunity to argue that the so-called “neutral rate” is lower than the Fed previously thought, warranting significant rate cuts even in a stable economy.
My “enjoyment” from this topic was primarily due to watching any number of people defend Fed policy, by arguing that no one really knows what the neutral rate is, and that it changes anyways.
FROM MOLECULES TO ELECTRONS
Mike Rodriguez, our head of Sustainable Finance, came to my rescue this week. I’ve been stuck on trying to get people to change the equation from Energy = Oil to Energy = Electricity. He pointed out how old that made me sound, and converted me to discussing the shift from molecules (fuel) to electrons (electricity).
Electricity inflation may be the single most important component of inflation we have ever faced.
CIRCULARITY IN AI
The one narrative that seems to be “circulating” in the data center/AI story is some signs of “circularity.” On one hand there is a virtuous circle. Companies are interconnected, where the growth in one, drives growth in another, which in turn, winds up helping the first company in the chain. We have seen the entire industry grow rapidly, with at least some evidence of a virtuous circle.
For the first time, I’m hearing (even from strong supporters of the space and valuations) concerns that the leaders are too intertwined and the space is susceptible to a pullback.
Bottom Line
No shortage of narratives impacting markets and the economy. Not just domestically, but also globally.
We head into this week:
Optimistic on Europe and global bond yields.
All-in on electron production and ProSec™.
Somewhat nervous about overall equity market levels.
Moderately concerned that the “victory laps” around tariffs have gotten very far ahead of themselves (tariff revenue for the past month came in at $31 billion, about the same as the prior month, bringing us to about $150 billion since March and putting us on a run rate of about $380 billion). We should start seeing more data impacted by tariffs, including Q4 earnings.
Keep an eye on crypto. Bitcoin has been worth watching (and owning) under this admin, but it approached August lows this weekend as we wrote this report.
It should be another interesting week, as we have month and quarter end Tuesday
[ZeroHedge] In the wake of Charlie Kirk’s assassination and a string of attacks on ICE facilities, Eric Raymond sketched three possible futures for what comes next; he warned that one path looks like a simmering civil war—the Bosnia template more than Fort Sumter (link). Many readers dismissed the idea of an urban insurgency as unrealistic under modern conditions.
But the militants themselves plainly think it’s workable—and they’re organizing accordingly.
[AmericanThinker] To my mind, the two biggest stories of the week for their domestic impact are Senator Chuck Schumer’s threatened government shutdown and the indictment of former FBI head James Comey. Neither of them bodes well for the Democrats, whose favorability ratings are already scraping bottom. Both revolve around the magic date September 30, that is, this Tuesday. If Congress does not pass a continuing resolution this Tuesday, the government will shut down.
Schumer insists that he won’t vote for a stopgap bill, something centrists in his party like Senator Jeanne Shaheen are seeking. Schumer, along with Congressman Hakeem Jeffries, has said that he will not vote for a continuing resolution unless there’s a restoration of the $1.5 trillion in cuts contained in the One Beautiful Bill enacted into law in July and the rescissions Trump wanted and got.
Unfortunately for the Democrats, Trump is significantly shrewder than they are. He’s made it clear that this will not be the usual performative shutdown and cave. Nope. He will use the shutdown “to justify firing federal employees running programs ‘not consistent with the president’s priorities’.”
Schumer has tried to rally his troops, claiming the president’s threat is a bluff, but I can’t imagine them believing that. Neither does Matt Margolis:
Well, Schumer won't vote for the CR anyway because his vote to break cloture last time all but destroyed him politically. But he’s probably going to have a hard time convincing Democrats on the fence that Trump’s threat is really just a bluff that won’t pan out because they know that the conservative-majority Supreme Court would ultimately side with Trump on this issue.
Eight Senate Democrats who backed the six-month GOP continuing resolution in March remain potential yes votes. That includes Sen. John Fetterman (Pa.), the only Democrat to support last week’s House-passed measure, which failed 44-48. Retiring Democrats like Whip Dick Durbin (Ill.) and Sen. Gary Peters (Mich.), plus Sens. Catherine Cortez Masto (Nev.), Maggie Hassan (N.H.), Kirsten Gillibrand (N.Y.), and Angus King (I-Maine), are also in play, though some have yet to commit.
In the end, Trump’s strategy is simple yet brilliant: force Democrats to choose between their obsession with expanding government handouts and the livelihoods of the very federal workers they claim to protect. Trump has the Democrats right where he wants them.
#1
Schumer going to get primaried out by AOC? I think Russ Vaught and Trump have Schumer and Hakeem in a corner. Watch them, they are slippery critters. These Dems don't do anything for the good of the country.
Direct Translation via Google Translate. Edited. by Gevorg Mirzayan
[REGNUM] On September 27, Russian Foreign Minister Sergey Lavrov addressed the UN General Assembly and then answered questions from journalists. In his speech, the minister touched on a wide range of issues, from Iran to Venezuela.
Despite the importance and interest of the topics raised, three were perhaps the most resonant: the "fixing" of the UN, Donald Trump's words, and the burial of the European mind.
Once upon a time, at the dawn of the organization's existence, it was assumed that the five permanent members of the Security Council—the USSR, China, the USA, France, and Germany—would work together to establish order and maintain peace and security. But now we see that Western countries not only fail to maintain global stability, but actually undermine it in every way.
"The widespread, gross violations of the principle of sovereign equality of states undermine the very faith in justice, leading to crises and conflicts. The root of the problems is the incessant attempts to divide the world into 'us' and 'them,' 'democracies' and 'autocracies,' 'blooming gardens' and 'jungles,' 'those at the table' and 'those on the menu.' Between a select few, who are allowed to have it all, and the rest, who are somehow obligated to serve the interests of the 'golden billion,'" explains Sergey Lavrov.
This isn't just a banal attempt to throw stones in a glass house. It's about the fact that for Western states, global destabilization is a kind of tinderbox, a side effect of their deliberate strategy.
"The main leitmotif of Lavrov's speech is that the main threat to international security is the policies of the West, which is trying to maintain or restore its hegemony," Dmitry Suslov, deputy director of the Center for Comprehensive European and International Studies, explained to Regnum news agency.
For this reason, the West is entering into confrontation with Russia, pursuing neo-colonial policies in the world – and also hindering UN reform.
The West resists bringing the structure of the organization (including the Security Council) into line with current realities and thus prevents the solution of one of the two key problems of the organization – its lack of representativeness.
"The Security Council is underrepresented in the modern world, which leads to its weakening, marginalization, and demilitarization," says Dmitry Suslov. After all, in order to make legitimate decisions on matters of war and peace, the Security Council must reflect the balance of power in the world.
“But this is not happening, because in the Council we see France and Great Britain, which are currently secondary countries, and we do not see giants like India and Brazil,” continues Dmitry Suslov.
There are also no Muslim countries (regardless of who currently holds power in the UK) or African countries. Therefore, expanding the permanent membership to include the Global South would solve the problem of representation.
"Our UN Secretary-General is a citizen of a NATO member country, the Director of the Department of Political Affairs and Peacebuilding is a citizen of a NATO member country, the Director of the Department of Peacekeeping Operations is a citizen of a NATO member country, the Director of the Office for the Coordination of Humanitarian Affairs, which deals with operations around the world and is a very influential structure, is a citizen of a NATO member country (specifically, Britain), and the Director of the Department of Security, which is also important for the organization of the work of the entire UN system, is also a citizen of a NATO member country," Sergey Lavrov reminds.
And he proposes to “democratize” the Security Council by expanding the representation of Asia, Africa and Latin America.
“We support the applications of Brazil and India for permanent membership in the Council while simultaneously correcting historical injustices against Africa within the parameters agreed upon by the countries of the continent themselves,” he said.
Yes, this won't immediately solve the problem of the UN's ineffectiveness. However, in the long term, expansion to include responsible and influential "southern" players committed to compromise solutions (and Brazil and India are precisely such players, unlike the far more hardline Iran or Turkey) will make Security Council conflicts far more costly and ineffective for the West. This will therefore encourage it to seek compromises where they can be found.
No less interesting was the part of Sergey Lavrov's speech that dealt with Donald Trump. In recent days, the American president has issued a series of harsh statements against Russia: he called it a "paper tiger" and nearly echoed Obama's "torn-apart economy" sentiment. He also complained of his disappointment with Vladimir Putin's unwillingness to accommodate Ukraine's wishes and threatened sanctions.
Sergey Lavrov dismissed Trump's words not as truth, but as emotionalism. "Every country, and especially every leader, has its own style of conducting affairs on the international stage, as well as at home," the minister stated.
He also expressed his attitude towards the American president’s statements as something that should have been said after a meeting with Volodymyr Zelensky : “In diplomacy, as you know, and above all in public diplomacy, much can be said based on the specifics of the moment.”
And all because Russia, first of all, looks not at words, but at actions. "Trump's toughening rhetoric in no way leads to a toughening of US policy. Their involvement in the Ukrainian conflict remains at the same level as before," says Dmitry Suslov.
In other words, Washington continues to sell weapons to Kyiv, neither increasing nor decreasing the volume of these sales. It maintains sanctions against Russia, neither strengthening nor weakening them.
According to Sergey Lavrov, Russia appreciates the fact that the Donald Trump administration proposed from the very beginning to resume dialogue between the countries, and does not see any deviation by the United States from its course of conducting an open, honest dialogue with the Russian Federation.
Moscow has no intention of playing the emotional diplomacy that Zelensky and his Western accomplices are trying to force upon it. "Knowing Trump's character, it's clear that if we start picking on and reacting harshly to his every tweet, to his not entirely adequate and respectful words, it will only anger him," says Dmitry Suslov. He'll anger himself—and perhaps move from words to action, which is exactly what Europe, along with the Kyiv regime, wants.
Moscow supports the American commitment to pragmatism. "In the current US administration's approach, we see a desire not only to facilitate the search for realistic solutions to the Ukrainian crisis, but also a desire to develop pragmatic cooperation without taking an ideological stance," says Sergey Lavrov. Russia sees dialogue with the pragmatic United States as a way to end the current conflict.
"Lavrov made it clear that Russia still views the Trump administration as a preferential interlocutor on Ukraine, while it views Europe as a proponent of war, trying to derail a political and diplomatic settlement," says Dmitry Suslov.
And Europe is now doing everything it can to prove the correctness of Russia's position. It's doing so through its irresponsible, incendiary behavior in Ukraine, as well as within the framework of Russian-European relations.
"A number of politicians who have found themselves in power in Brussels and some EU and NATO capitals are seriously beginning to discuss World War III as a plausible scenario. These figures are undermining any efforts to find a fair balance of interests among all members of the international community, attempting to impose their unilateral approaches on others, grossly violating the key statutory requirement—respect for the sovereign equality of states," says Sergey Lavrov.
And he states that neither Kyiv nor its European sponsors seem to understand the urgency of the situation or are willing to negotiate fairly.
It's understandable why they're not being addressed. After all, while Trump views the war in Ukraine as foreign, inherited from the Joe Biden administration (as he reminds us in nearly every speech on Ukraine), European leaders view it as their own. And defeat in it will also be their own.
"Neither Kiev nor the Europeans are prepared to negotiate fairly, because they understand that any such agreement, based on respect for Russian interests and objective reality, would be a colossal political defeat for them, which could simply sweep the current European elites into the dustbin of history," says Dmitry Suslov.
The electorate and their own businesses simply will not forgive them for the economic, social, diplomatic, and even sacrifices that were made on the altar of a lost war.
Moreover, the project of European integration itself could be consigned to the scrap heap along with the elites. Even before the CBO, many national politicians criticized the situation in which crucial governance instruments and powers were handed over to ineffective and unelected Brussels officials, and defeat in the war would only prove the Eurosceptics right.
This is precisely why Europe is so determined to keep its cool—doing everything it can to keep the war going. It's hoping for some miracle—a "black swan" that will somehow turn the situation at the front to its advantage.
And in this hope, it is taking increasingly unacceptable steps that increasingly equate defeat in the war with the collapse of the European Union as such.
For example, to ensure the continued survival of the Kyiv regime, German Chancellor Friedrich Merz proposes using 140 billion euros from the main body of frozen Russian assets to finance it in 2025.
"In the hope that Russia will be exhausted and, after the war, will accept less favorable terms," Dmitry Suslov explains Berlin's logic. In other words, to put it simply, it will forgive this theft.
Europe is also fueled by the hope that eventually the US will be drawn into the war. Sooner or later, it will have to somehow repay those 140 billion. Not to mention that countries in the Global South will think twice before investing their sovereign wealth in the European economy.
If, of course, by the end of the Second World War there is anything left there at all that would be worth investing in.
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
